Politics

Fact Check: The Buffett Rule

Tuesday, September 20, 2011

President Barack Obama says it's not right for billionaires to pay a lower income tax percentage than the middle class -- and it turns out, they aren't.

The so-called "Buffet Rule" was coined after billionaire Warren Buffet's famous complaint that his secretary pays a greater percentage of income tax than he does. That's true, but it is certainly not the norm.

Buffet is worth $50 billion. His income tax rate is 17.4 percent. His secretary pays twice that at 33 percent.

"It is wrong that in the United States of America a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million," said Obama.

Fact Check: While that's not the norm, on average American's making more than a million dollars a year pay 29.1 percent, almost double the rate of those making $50,000 to $75,000 a year who on average pay 15 percent in federal taxes.

"But there's a big difference across that income category of millionaires," says Roberton Williams, a senior fellow with the non-partisan Tax Policy Center, that crunched the numbers.

Williams says the richest of the rich, the top 400 filers, pay on average just 18 percent because, like Buffet, they get most of their income from dividends and capital gains that are taxed at a maximum rate of 15 percent.

"So that's why he pays less tax than his secretary," says Williams.

Williams says it's also true that 46 percent of Americans pay no income taxes at all because their deductions would outstrip what they would owe. However, the rich still have the best deal.

"Rich guys getting a much bigger break in the tax system& if we zeroed out all the tax breaks rich people would pay a larger share of the taxes than they do now," says Williams.

Republicans in Congress argue against raising taxes on the rich will hurt job creation.

"It will attack job creators, divide people and doesn't grow the economy," says Rep. Paul Ryan, R-Minnesota.

Former labor secretary and economist Robert Reich calls that argument a myth.

"The reality is most jobs are created by small business owners and only 1.2 percent of small business owners are in the very top tax bracket," says Reich.

Fact Check: Reich's number is accurate. But whether the richest Americans should pay more is more a matter of opinion.

(Copyright ©2014 KGO-TV. All Rights Reserved.)

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Tags:
barack obama, warren buffett, taxes, politics, mark matthews
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